Journal of Empirical Finance ( IF 3.025 ) Pub Date : 2020-08-04 , DOI: 10.1016/j.jempfin.2020.07.005 Yudong Wang , Zhiyuan Pan , Chongfeng Wu , Wenfeng Wu
We show that the detrended equi-correlation of the returns of industry portfolios is a strong predictor of excess returns to the S&P 500 Index. Using a sample from 1927 to 2015, our monthly industry equi-correlation (IEC) index produces an out-of-sample of as high as 0.888%. For an investor with mean–variance utility, the IEC index can generate utility gains of 120.5 basis points over the benchmark model of the historical average. The return predictability of the IEC index is stronger than that of all of the popular predictor variables. Furthermore, we find that incorporating IEC in a univariate predictive regression with a popular predictor can significantly improve the out-of-sample forecasting performance of the individual models and their forecast combinations. These findings are confirmed by a large battery of robustness checks.
中文翻译:
行业均衡:股票收益的有力预测指标
我们表明,行业投资组合回报率的下降趋势相关性是标准普尔500指数超额收益的有力预测指标。使用1927年至2015年的样本,我们的月度行业均衡(IEC)指数产生了样本外高达0.888%。对于具有均方差效用的投资者而言,IEC指数可以比历史平均值的基准模型产生120.5个基点的效用收益。IEC指数的回报可预测性强于所有流行的预测变量。此外,我们发现,将IEC与流行的预测变量一起纳入单变量预测回归中可以显着改善单个模型及其预测组合的样本外预测性能。大量的耐用性检查证实了这些发现。